RBMunkin: "A pal of mine is freaking out about a 1099-R he got. He inherited an IRA and his understanding is that inheritance is not taxable until you get to mega-amounts, which I believe is true. The amount is $91K.

But he withdrew the money to improve a vacation rental he has. Turbo tax is telling him he owes much bucks for this action. Is this correct even if it's an inherited IRA?"

WRT to federal taxes, he is not being taxed because he inherited. He does, however, owe income tax for withdrawing from an IRA.

For many federal tax purposes, withdrawing from an IRA is withdrawing from an IRA, regardless of whether the withdrawee funded the IRA or inherited it.

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